[Federal Register Volume 65, Number 9 (Thursday, January 13, 2000)]
[Notices]
[Pages 2216-2218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-817]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42318; File No. SR-Phlx-99-49]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the
Philadelphia Stock Exchange, Inc., Implementing a Pilot Program to
Assess a Monthly Capital Funding Fee
January 5, 2000.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 196-4 thereunder,\2\ notice is hereby given that
on November 26, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. On January 5, 2000, Phlx submitted an amendment to the
proposed rule filing (``Amendment No. 1'').\3\ The Commission is
publishing this notice and order to solicit comments on the proposed
rule change from interested persons and to approve the proposal until
April 5, 2000.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Phlx to Marla Chidsey, Attorney, Division of
Market Regulation, Commission, from Bob Ackerman, Senior Vice
President, Chief Regulatory Officer, Phlx, dated January 5, 2000.
Amendment No. 1 provides Phlx's a fee schedule and is attached as
Appendix A.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Phlx proposes to amend its schedule of dues, fees, and charges
to charge each of the 505 Exchange seat owners \4\ a monthly capital
funding fee of $1,500 per seat owned.\5\ The proposed capital funding
fee will be implemented under a three-month pilot program to expire on
April 5, 2000.\6\
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\4\ For the purpose of filing, the term owner is defined as any
person or entity who or which is a holder of equitable title to a
membership in the Exchange.
\5\ Although the term ``seat owner'' is not defined in Phlx's
Bylaws or the Certificate of Incorporation, the term seat owner is
the equivalent of a ``membership owner'' as referenced in Phlx's
Bylaws and Certificate of Incorporation. However, a seat owner is
not per se a member of the Phlx Exchange. Telephone conversation
between Marla Chidsey, Attorney, Division of Market Regulation,
Commission, and Bob Ackerman, Senior Vice President, Chief
Regulatory Officer, Phlx (January 5, 2000).
\6\ On November 26, 1999, the Exchange filed for permanent
approval of the $1,500 capital funding fee. See SR-Phlx-99-51. On
October 1, 1999, the Exchange filed a proposal to charge the monthly
$1,500 capital funding fee. See Securities Exchange Act Release No.
42058 (October 22, 1999), 64 FR 58878 (December 15, 1999). However,
on November 17, 1999, the Exchange withdrew SR-Phlx-99-43.
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II. Self-Regulatory Organization's Statement Regarding the Purpose
of, and the Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to amend Phlx's schedule
of dues, fees, and charges to charge a monthly capital funding of
$1,500 per Exchange seat to seat owners.\7\
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\7\ Under Phlx's by-laws, seat owners who lease out their seats
are not deemed members of the Exchange. See Phlx Rules of Board of
Governors, Rules 3, 5, 17, and 18.
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The $1,500 capital funding fee will be imposed on each of the 505
Exchange seat owners on the last business day of the calendar month.
Thus, the owner is responsible for paying the entire subsequent month's
fee on the last business day of the prior month.\8\ The Exchange
intends to segregate the funds generated from the $1,500 fee from
Phlx's general funds.
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\8\ For example, owners of record on September 30 will be billed
$1,500 for the month of October.
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The monthly $1,500 fee is part of the Exchange's long-term
financing plan. This monthly fee will provide funding for technological
improvements and other capital needs.\9\ Specifically, it is intended
to fund capital purchases, including hardware for capacity upgrades,
development efforts for decimalization, and trading floor expansion.
The revenue raised from the fee will be utilized over a three-year
period. At that time the Exchange intends to reevaluate its financing
plan to determine whether this fee should continue. The revenge
generated from
[[Page 2217]]
the fees will assist the Exchange in remaining competitive in the
capital markets environment.\10\
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\9\ This fee is distinguished from the Exchange's technology fee
in that the technology fee was intended to cover system software
modifications, Year 2000 modifications, specific system development
(maintenance) costs, SIAC and OPRA communication charges, and
ongoing system maintenance charges. The technology fee became
effective upon filing in March, 1997. See Securities Exchange Act
Release No. 38394 (March 12, 1997), 62 FR 13204 (March 19, 1997)
(SR-Phlx-97-09).
\10\ In addition, the Exchange has separately proposed to amend
its schedule of fees, dues, and charges to allow for a monthly
credit of up to $1000 to be applied against certain fees, dues,
charges and other amounts owed to the Exchange by an owner who is
also a member of the Exchange (SR-Phlx-99-54).
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For these reasons, the Exchange believes that the proposed rule
change is consistent with Section 6 of the Act,\11\ in general, and
with Section 6(b)(4),\12\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees, and other charges among
its members, issuers, and other persons using its facilities.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule imposes no burden on
competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
The Exchange received no written comments on the proposal.\13\
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\13\ However, in connection with SR-Phlx-99-43, see, note 6
above, the Exchange received comments from the following parties:
Bloom Staloff, Robert W. Baird & Co. Inc., William J. Kramer, Doris
Elwell, Benton Partners, Karen D. Janney, Robert Leff, and Vansco,
Wayne & Genelly.
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III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, NW, Washington,
DC 20549-0609. Copies of such filing will also be available for
inspection and copying at the principal office of the Phlx. All
submissions should refer to File No. SR-Phlx-99-49 and should be
submitted by February 3, 2000.
IV. Commission's Findings and Order Granting Accelerated Approval
of Proposed Rule Change
After careful consideration, the Commission finds, for the reasons
set forth below, that the Phlx's proposal is consistent with the
requirements of the Act and the rules and regulations thereunder.
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(4) of the Act.\14\ Section 6(b)(4) of the Act requires
that the rules of a national securities exchange provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities. The
proposal is consistent with the Act because it is an across-the-board
assessment on all seat owners intended to raise revenues to provide
capital improvements to the Exchange that the Phlx has represented are
necessary to help the Phlx remain competitive with other markets.
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\14\ 15 U.S.C. 78f(b)(4).
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The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publication of notice
thereof in the Federal Register. The Phlx has represented that to
complete in the current capital market environment the Exchange needs
funding to make technological and capital improvements. The Exchange
represents that the revenue raised from the fee is necessary to fund
capital purchases, including hardware for capacity upgrades,
development efforts for decimalization, trading floor expansion, and
communication enhancements. Based upon this these representations of
the Exchange the Commission deems it appropriate to approve the
proposed rule change on an accelerated basis until April 5, 2000.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-Phlx-99-49) is hereby
approved on an accelerated basis until April 5, 2000.\16\ In approving
this pilot program, the Commission has considered its impact on
efficiency, competition, and capital formation.\17\
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\15\ 15 U.S.C. 78s(b)(2).
\16\ The Commission's approval of this pilot should not be
interpreted as suggesting the Commission is predisposed to approving
the proposal permanently.
\17\ 15 U.S.C. 78c(f).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
Appendix A
[New Text Underlined; Deleted Text Bracketed]
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Membership dues or Foreign 1,000.00 semi-annually
Currency User Fees.
Foreign Currency Option 1,000.00 semi-annually
Participation Fee.
Capital Funding Fee \2\...... 1,500.00 monthly
Application Fee.............. 200.00
Initiation Fee............... 1,500.00
Transfer Fee................. 500.00
Trading Post/Booth........... 750.00 quarterly
Controller Space............. 750.00 quarterly
Floor Facility Fees.......... 375.00 quarterly
Shelf Space on Equity Option 375.00 quarterly
Trading Floor.
Direct Wire to the Floor..... 60.00 quarterly
Telephone System Line 22.50 monthly/per extension
Extensions.
Wireless Telephone System.... 200.00 monthly
Execution Services/ 200.00 monthly
Communication Charge.
Stock Execution Machine 300.00
Registration Fee (Equity
Floor).
Equity, Option, or FCO 750.00 monthly
Transmission Charge.
FCO Pricing Tape............. 600.00 monthly
Option Report Service:
(New York)............... 600.00 monthly
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(Chicago)................ 800.00 monthly
Quotron Equipment............ 225.00 monthly
Instinet, Reuters Equipment.. Cost passed through
Examination Fee.............. 1,000.00 monthly \3\ or pass-through of
another SRO's fees
Technology Fee \4\........... 600.00 semi-annually
Review/Process Subordinated 25.00
Loans.
Registered Representative
Registration:
Initial.................. 25.00
Maintenance.............. 25.00 annually
Transfer................. 25.00
Option Mailgram Service...... 117.00 monthly
Off-Floor Trader Initial 200.00
Registration Fee.
Off-Floor Trader Annual Fee.. 200.00
Computer Equipment Services, 100.00 per service call and 75.00 per
Repairs or Replacements \5\. hour (Two hour minimum)
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\1\ An exemption from foreign currency user fees is extended to PHLX
members also holding title to a foreign currency options
participation.
\2\ This fee applies to seat owners (holders of equitable title to a
membership in the Exchange) and is assessed on a per-membership basis.
This fee is imposed pursuant to a pilot program in effect from January
5, 2000 to April 5, 2000.
\3\ This fee is applicable to member/participant organizations for which
the PHLX is the DEA. The following organizations are exempt: (1)
inactive organizations (2) organizations operating from the PHLX
trading floor which have demonstrated that at least 25% of their
income as reflected on the most recently submitted FOCUS Report was
derived from floor activities (3) organizations for any month where
they incur transaction or clearing fees charged directly by the
Exchange or by its registered clearing subsidiary, provided that the
fees exceed the examinations fees for that month; and (4)
organizations affiliated with an organization exempt from this fee due
to the second or third category. Affiliation includes an organization
that is a wholly owned subsidiary of or controlled by or under the
common control with an exempt member or participant organization. An
inactive organization is one which had no securities transaction
revenue, as determined by semi-annual FOCUS reports, as longs as the
organization continues to have no such revenue each month.
\4\ An exemption from the technology fee is extended to foreign currency
options participants who are also affiliated with the Exchange as Phlx
members.
\5\ These fees will be effective from January 1, 2000 until March 31,
2000, unless extended consistent with the requirements of Section
19(b) of the Securities Exchange Act of 1934. At this time, these fees
will not be applied to participants on the Foreign Currency Options
Trading Floor.
\6\ These fees will be effective from January 1, 2000 until March 31,
2000, unless extended consistent with the requirements of Section
19(b) of the Securities Exchange Act of 1934. At this time, these fees
will not be applied to participants on the Foreign Currency Options
Trading Floor.
[FR Doc. 00-817 Filed 1-12-00; 8:45 am]
BILLING CODE 8010-01-M
